Ambarella Inc (AMBA) Earnings Preview: Analysts Weigh In


Semiconductor company Ambarella Inc (NASDAQ:AMBA) is slated to announce its fiscal second quarter 2016 earnings results on Tuesday, September 1, after market close. The Street expects the company to post earnings of $0.81 per share on $81.73 million in revenue, up from $0.37 earnings per share on $46.97 million in revenue year-over-year.

The company most famous for providing the processors in GoPro cameras was having a tremendous year in terms of stock growth, increasing almost as much as 150% year-to-date until mid-June when the stock dropped over 25% within a two-day span. Ambarella’s stock drop was driven by a bearish call from Citron Research, in which the stock’s share price was called “ridiculous” in a report.

The stock somewhat rebounded throughout July to a high of $124.23 per share, but fell back down to as low as $87 per share in mid-August amid rumors that competing semiconductor company Qualcomm was planning on entering the drone market.

Wall Street analysts see the sell-off as an overreaction with most still remaining bullish on Ambarella.

For one, Stifel Nicholaus analyst Kevin Cassidy maintained a Buy rating on Ambarella with a price target of $115 on August 26, citing the recent sell-off as an overreaction and that the company remains the leader in video capture, compression, transmission, and analytics. Additionally, the analyst expects Ambarella to post strong revenue growth on a year-over-year basis in its Q2 report on Tuesday. Cassidy also anticipates upside potential in the drone and IP security markets.

On average, Kevin Cassidy has a 70% success rate recommending stocks and a +27.6% average return per recommendation when measured over a one-year horizon and no benchmark. He has rated Ambarella a total of 14 times since 2013, earning a 93% success rate recommending the company and a +79.4% average return per recommendation.

Similarly on August 26, Pacific Crest analyst Brad Erickson reiterated an Overweight rating on Ambarella with a price target of $123, noting that shares are attractive at current levels. The analyst commented, “While QUALCOMM’s imminent entry into drones could have a modest impact on Ambarella’s business, given its roughly 10% revenue exposure to drones, the past month’s 30% pullback appears overdone. Further, we think Ambarella’s power-management benefits offer compelling differentiation for this uber-niche category where traditional cost and size integration benefits may not outweigh the critical need for high-quality video capture and low power consumption.”

Overall, Brad Erickson has a 74% success rate recommending stocks and a +19.1% average return per recommendation when measured over a one-year horizon and no benchmark. He has rated Ambarella eight times since 2014, earning an 88% success rate recommending the company and a +37.8% average return per recommendation.

Out of 11 analysts polled by TipRanks within the past 3 months, 6 analysts are bullish on Ambarella and 5 are neutral. The average 12-month price target for the company is $106.35, marking a 10.42% potential upside from where shares last closed.